How Smart Technology is shaping Tomorrow’s Supply Chains Today

14 June 2017

Faced with ongoing disruption that is largely being fuelled by
technology and innovative software development, almost every industry is being
forced to rethink traditional strategies and operational approaches.

Within the vast realm of global supply chain management and logistics,
such disruption is already becoming evident. New technology platforms and
software systems are challenging leaders and managers to discard legacy systems
and to invest in more efficient ways of implementing key tasks. There is no
doubt that for decision makers and stakeholders within the supply chain, it has
become imperative to identify and understand the opportunities that are
emerging in this context.

According to research firm Frost & Sullivan, logistics global spend
is expected to reach $10.6 trillion by 2020, with transportation accounting for
the majority of the spending at 65%. With this in mind, decision makers need to
ensure that they are directing this spend to the right places and in doing so, effectively
future-proofing the value chain.

By examining the current landscape and taking into account the state of
technology today, it is clear that certain trends will be shaping every aspect
of supply chain management and logistics. Chief among these trends are the
emergence of autonomous vehicles, 3D printing, unlimited opportunities created
by analysing and extrapolating big data, blockchain technology and the role of
online marketplaces.

Geared for Autonomous Logistics

Having investigated the development of autonomous
vehicles, Frost & Sullivan has predicted that most moving vehicles within
logistics - from forklift to delivery fleets, will be semi-autonomous and some fully
autonomous in the not too distant future. With major technology companies such
as Uber, Amazon and Google pouring investment and intellectual capital into
self-driving vehicles, it is expected to become a major part of daily business
operations. For the supply chain, autonomous logistics will translate into Autonomous Guided Vehicles, Truck Platooning,
Autonomous Trucks and Ships, Autonomous Cargo Rail and drones for last mile
delivery.

With regards to delivery drones, these are expected to transport packages to nearby places within one or two
minutes. Existing and proposed projects in this space include the DHL Parcelocopter, Google’s Project Wing
Drone and Amazon’s Prime Air. Notably, Amazon has proposed a 200-foot
designated airspace (between 200 and 400 feet from the ground) to be reserved
for drone flights.

While it may appear to be eerily sci-fi, the concept of autonomous
logistics is already becoming a reality!

Data-Driven Decisions Taking Over

Although it may be a now-clichéd phrase, data is evidently the new oil –
and it is flowing into every type of business at a rapid pace. As more
unstructured data becomes integrated into daily analysis and evolving into
structured data, it will undoubtedly lead to enhanced efficiencies and quicker,
calculated decision-making within the supply chain.

Growing access to data will also mean that analytics will move from reactive to pre-emptive to anticipatory. Amazon,
for example, through its anticipatory shipping model, will know what you want
even before you know you want it…

For the wider industry and logistics stakeholders,
predictive and prescriptive analytics are already presenting a number of
applications. These include route optimization in
real time; ‘control-on-the-go’ as mobile devices are used to increase
enterprise visibility; faster reaction times to supply chain challenges; and
product tracking data to understand customer purchasing behaviour and support
requirements.

For business leaders, the critical element of big data is to understand
where and how this surge of information can be harnessed to benefit the supply
chain.

Shifting to Online Marketplaces

With regards to brokerage related services within the supply chain, it is
predicted that two key platforms will disrupt the status quo: mobile based and
online marketplaces. With retail already undergoing its own digital
transformation, it is unsurprising that supply chain management will have its
own digitisation journey.

More specifically, the emergence of online marketplaces within the supply
chain will involve the closer integration of all parties to include all
stakeholders - namely sellers,
buyers, freight forwarders and financial institutions…all connected to each
other through an open, online platform.

As a natural
expansion of this trend, mobile based services and platforms will soon be able
to aggregate a network of local couriers, matching individual deliveries in
real time to the optimum carrier according to who is the nearest, available, quickest
and best suited to fulfil that specific job.

Although it is a term more frequently associated with financial
technology businesses, blockchain technology is poised to impact key functions
within logistics. In short, the blockchain
refers to distributed cryptography based upon an open-source and real time data
platform. This platform verifies digital transactions on the network and is
arguably set to become the new operating system for supply chain and logistics
globally.

By integrating
this technology, the blockchain can enable a strong and secure exchange for
shared logistics, coordinating a vast array of activities from sharing
unutilised space in a shipping container or warehouse, to optimising truck
fleets. Stakeholders can eliminate supply chain opaqueness by having a record
of all logistics transactions in blocks. It can, for example, provide insights
around drivers, routes and on-the-move goods and services. Added to this, blockchain
technology can yield important benefits with regards to B2B transactions – such
as cross border payroll processing and smart contracts.

“We know – thanks to Hayek – that
information is best used when it is not centralised and when it is not being
monopolised by some central institution. We know that flat and non-hierarchical
systems use info best…new innovations like the blockchain make this possible,”
notes Patrick Byrne, CEO, Overstock.

One standout example of this technology already in use is a platform
called Ethereum, a decentralized platform that runs smart contracts. These are
contracts steered by applications that ‘run exactly as programmed, without any
possibility of downtime, censorship, fraud or third party interference.’

For logistics stakeholders, the Ethereum
platform is set to facilitate in negotiating prices and monitoring inventory
levels that will result in minimizing transaction costs and building more agile
supply chains. In addition, the application can streamline processes for multiple stakeholders within the supply chain,
as well as initiate more secure forms of
transactions and facilitate shared logistics opportunities in near real time.

Consider the information used during an export or
import process, for example. If import terminals received data from bill of
ladings a lot sooner in the process, shipping terminals and freight forwarders
could plan and execute more efficiently -without jeopardizing sensitive
information about the owners and value of the cargo. Also, costly delays and
losses due to missing paperwork will be avoided.

Within the financial sector, institutions will have
clear visibility of a supplier’s reliability, using this data to make
calculated decisions like extending a much needed credit facility to aid trade.
Likewise, within the retail and manufacturing sector, production forecasting
could be greatly improved by identifying trends in product demand and
distribution, while minimising paperwork and creating ease of flow of
transactions and key agreements.

3D Printing Marches Forward

A technology that has long been waiting in the corporate wings, 3D printing
capabilities are improving daily with vast potential in terms of freedom of
design. It can also lower production costs by up to 50% - translating from low
cost homes printed within a day to expertly customized medical implants and
prosthetics.

This fast emerging technology will greatly impact large manufacturers and
is already impacting purchasing behaviour within the retail sector. For
example, Nike is partnering with HP and using the HP Jet Fusion 3D printer to
produce 3D printed footwear at greater speeds than ever before - enabling a new
level of customization and innovation.

Moving away from retail and into the skies, GE Aircraft has developed the
world’s largest commercial jet engine using 3D printed metal parts for the GE9X
twin-engine jet. One of the parts includes
3D printed nozzles, replacing conventional nozzles that previously had over 12
welded parts. According to reports, this has led to 25% weight reduction,
increased fuel efficiency and is said to be the company’s quietest engine to
date - dramatically reducing engine complexity, with further production planned
for 2020. (J.Coren, 2016).

This trend is set to impact the shipping industry as well, especially given
that 95% of the goods that are currently shipped could be 3D printed!

The Emergence of ‘Factory-in-a-Box’

Given this ongoing
development and strong 3D printing capabilities coming to the fore, we may be
witnessing the introduction of a ‘factory-in-a-box’ - whereby we will no longer
need multiple machines to make a single product.

In the near future, each
individual 3D printer could be able to print several different materials using
multiple processes in multiple, decentralised locations. As a result, logistics
and supply chain management could be drastically transformed - to only
servicing nimble, innovative, garage-sized industries….

While these technologies and trends are arguably still
in the development stage, they are forcing businesses to shift their approach
and to strongly consider and embrace transformation by exploring possible
applications.

For supply chain management and logistics
stakeholders, we believe that the emergence of these trends serve as both
inspiration and motivation to begin the process of future-proofing and
implementing sustainable processes, right now.

Without doubt, only the agile and responsive will
survive today in order to thrive tomorrow…

Disclaimer: The information and opinions expressed in this website and the Supply Chain Update newsletter in no way constitutes professional advice and does not necessarily reflect the views and opinions of the editor and staff of Supply Chain Update or Vicenda.